Statutory compliance
This query is : Resolved
14 December 2009
Can the share application money be received in form of kind? Do the following entry is correct?
ADVANCE TO CREDITORS a/c Dr
to SHARE APPLICATION MONEY a/c.
ADVANCE TO CREDITORS a/c Dr
to SHARE APPLICATION MONEY a/c.
14 December 2009
Share application money can be received in cash.
But in case of IPO/Right Issue etc., now-a-days; these are received by account payee cheque or demand draft only.
The entry will be:-
Cash or Bank a/c Dr
To Share Application A/c
But in case of IPO/Right Issue etc., now-a-days; these are received by account payee cheque or demand draft only.
The entry will be:-
Cash or Bank a/c Dr
To Share Application A/c
19 December 2009
Can the share application money be received in form of kind? Do the following entry is correct?
ADVANCE TO CREDITORS a/c Dr
to SHARE APPLICATION MONEY a/c.
ADVANCE TO CREDITORS a/c Dr
to SHARE APPLICATION MONEY a/c.
25 July 2025
Regarding your question on **receiving share application money in form of kind** and the journal entry:
---
### Can share application money be received in form of kind?
* **No, share application money is normally received in cash or cash equivalent** (cheque, demand draft, electronic transfer).
* The Companies Act and SEBI guidelines specify share application money should be received in **cash or by bank transfer**.
* **Receiving shares against non-cash consideration (like assets or kind) is considered as a subscription by way of allotment and treated differently** under the Companies Act.
* For allotment against assets or kind, there are separate procedures involving **valuation reports, board approvals, and disclosures**.
---
### Is the entry correct?
> Advance to Creditors a/c Dr
> To Share Application Money a/c
**No, this is incorrect.**
* Share Application Money is a liability or equity-related account representing money received from applicants for shares.
* **Advance to Creditors** is an asset account representing money paid in advance to suppliers.
* If you receive share application money, the correct entry is:
```plaintext
Bank or Cash A/c Dr
To Share Application Money A/c
```
---
### Summary:
* Share application money **cannot** be accepted as goods or kind directly.
* If shares are issued for non-cash consideration, it is handled as **allotment against consideration other than cash**, with proper valuation.
* The journal entry you proposed is **not correct**.
---
If you want, I can guide you on how to account for shares issued against non-cash consideration (like assets). Would you like that?
---
### Can share application money be received in form of kind?
* **No, share application money is normally received in cash or cash equivalent** (cheque, demand draft, electronic transfer).
* The Companies Act and SEBI guidelines specify share application money should be received in **cash or by bank transfer**.
* **Receiving shares against non-cash consideration (like assets or kind) is considered as a subscription by way of allotment and treated differently** under the Companies Act.
* For allotment against assets or kind, there are separate procedures involving **valuation reports, board approvals, and disclosures**.
---
### Is the entry correct?
> Advance to Creditors a/c Dr
> To Share Application Money a/c
**No, this is incorrect.**
* Share Application Money is a liability or equity-related account representing money received from applicants for shares.
* **Advance to Creditors** is an asset account representing money paid in advance to suppliers.
* If you receive share application money, the correct entry is:
```plaintext
Bank or Cash A/c Dr
To Share Application Money A/c
```
---
### Summary:
* Share application money **cannot** be accepted as goods or kind directly.
* If shares are issued for non-cash consideration, it is handled as **allotment against consideration other than cash**, with proper valuation.
* The journal entry you proposed is **not correct**.
---
If you want, I can guide you on how to account for shares issued against non-cash consideration (like assets). Would you like that?
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